Home Ownership Overated?

[Bob_Smith]

Bob_Smith,
If you don't mind, may I ask where you live in Iowa? *

We live just outside Cedar Rapids, and the urban sprawl is beginning to envelop our small town. *I wish I knew where all theses people are coming from, so I could send them back

Bow-tie, we're near Waterloo now, but the house I posted is in Storm Lake, which is where we plan to move. I have noticed that the CR/Iowa City area is spreading.

[bow-tie]

It seems that Cedar Rapids has a pop. of 120,000. *I don't think that counts as urban. *

Hey Hyper-
When you're a hayseed like I am, 50k+ is URBAN!


Bob_Smith
Heading to Storm Lake, huh? Home of Buena Vista College. Had some good friends that went to school there. Very beautiful college town.

Yeah, the corridor, as the econcomic development group likes to call it, between Cedar Rapids and Iowa City, is growing like gangbusters. Makes me want to move farther west, but with paycheck(s) coming form Cedar Rapids, it makes it difficult to move farther away. :-/

[bow-tie]

Seriously though...we have the same thing here in CA. *I moved from the SF bay area a couple of hours away up to sacramento. *It was like moving to Mars. *Nothing and nobody. *Within 7 years the area was incredibly overbuilt, shopping malls and strip malls were springing up everywhere and like the bay area, you didnt want to be out on the road during rush hours. *

Like you, I have no idea where these people are coming from, unless the SF bay area has simply emptied itself. *In which case I'm curious as to who has bought and is buying all those overpriced homes down there.

TH,

Although probably not on the same scale as what is experienced elsewhere, this area here is undergoing a very similar growth period. I, for the life of me, can't understand where the people are coming from. My guess is, perhaps some of the bigger cities near us, like Chicago / Twin Cities / St. Louis, using some of their housing gains to move to a lower cost area, and building huge homes. Otherwise, I haven't the foggiest how any of these people are affording the houses that are being built around here.

Well, I know where our new neighbors are coming from.
The Chicago area! (90 miles east). Most new neighbors
come out here from the suburbs, look at the prices and
say "Damn, how can we go wrong?" Answer: they
can't. Nor can we, as we are already here and the
Chicago invasion shows no sign of decline.

John Galt

Bow-tie, we're near Waterloo now, but the house I posted is in Storm Lake, which is where we plan to move. I have noticed that the CR/Iowa City area is spreading.

Bob,

I grew up in Worthington, Minnesota which is not too far North of Storm Lake.

I can't say many nice things about the weather in Worthington. The land was bascially flat and treeless. The wind was always blowing. In fact they hold the national windsurfing championships in Worthington, because it is one of the windiest places in the U.S. - On the lake I grew up fishing - Lake Okabena. I did not know what a trout looked like until I moved to Minneapolis.

The winters were very harsh in the 60's - 2 inches of snow with that wind would produce 10 foot drifts. I was snowed in at Souix falls South Dakota in 1968 with 36 inches of snow for 3 days - 60 miles from home - 20 foot drifts.

The summers were above 90 degrees and the wind still blew hot! 8)

I hope the weather is better in Storm Lake for you - Why are you going to move there?

[Jarhead*]

[quote author=TH link=board=young;num=1093200276;start=30#39 date=08/24/04 at 12:58:

I already snooped at real estate prices an hour or so away to the north, northeast and northwest...relatively thinly settled areas in the "middle of nowhere". *Prices have already jumped to keep pace.

TH: No bargains in Chico.
Actually, Chico is a pretty unique little city. Self-contained in that too far from Sacramento or Bay Area to make a commute.
The price of admission has always been higher in Chico than any other town north of Sacramento, and currently about on par with Sacramento.
You were talking about large property losses in Sacramento, after the last peak, that occurred in 1990 forword. Chico property stayed flat for about 5 years, but there was only isolated cases where folks sold at a loss.
Sacramento went through a large scale military base closures that added to their problems about that time.
Chico is pretty much recession proof, as there are 17,000 sudents at Chico State, and Chico has become a regional shopping center for most of the surrounding area. It was also on the front cover of Kiplinger magazine about 6 years ago, as the best place in the country (Towns less than 100,000 ), for an active retirement. It has the largest Municipal Park (Bidwell Park) in the country. (3400 acres).
In an effort to hold down growth, the city has a very aggressive green belt policy, that of course adds to the supply & demand equation.
All in all, it has always been a pretty solid spot for real estate.
By the way, I don't live in Chico, but have always liked the town.

[Bob_Smith]

I hope the weather is better in Storm Lake for you - Why are you going to move there?

My parents live there and are getting older. I'll see more of my siblings too when they come to visit. So it's due to family, although we like the town. I'm not moving there for the weather, that's for sure, although it's pretty typical weather for the upper midwest. The midwest with its winters is not a place for sissies.

[Martha]

I grew up in Worthington, Minnesota which is not too far North of Storm Lake.

I can't say many nice things about the weather in Worthington.

I spent a summer working in Worthington as a college student. It was hotter than then blazes and I was nauseated all summer from the smells of fertilizer and animal waste.

Martha

I spent a summer working in Worthington as a college student. *It was hotter than then blazes and I was nauseated all summer from the smells of fertilizer and animal waste. *Martha

I can't say many good things about the place. Where did you work there?

[Martha]

I can't say many good things about the place. Where did you work there?

Southern Minnesota Regional Legal Services (legal aid), helping people out with social security disability appeals.

Martha

[bow-tie]

...although it's pretty typical weather for the upper midwest. The midwest with its winters is not a place for sissies.

The weather here can be pretty hateful, but its home.

[Bob_Smith]

The weather here can be pretty hateful, but its home.

Right. Plus there are many other advantages here that supersede the weather. I'd take a cold winter over the brutal humidity of Louisiana any day. There are trade-offs no matter where one lives, I guess. I have seen some places that don't seem to offer any advantages, however. Just driving through, I've wondered about Gary, Indiana, for example. Now I can add Worthington MN to the list.

Right. Plus there are many other advantages here that supersede the weather. I'd take a cold winter over the brutal humidity of Louisiana any day. There are trade-offs no matter where one lives, I guess. I have seen some places that don't seem to offer any advantages, however. Just driving through, I've wondered about Gary, Indiana, for example. Now I can add Worthington MN to the list.

It's on my list!

- Moving to the Twin Cities was like paradise compared to Worthington. We have Hills, Trees, trout steams, 50 plus lakes in the cities. We have milder winters and summers without the wind!

I'm not even including the restuarants and cultural activites!

[jazz4cash]

Home ownership is not in any way over-rated due to very favorable tax treatment of mortgage interest and ability to leverage. What other appreciating asset can you buy had for 0-5% down?

What's over-rated is appreciation of real estate (because it only benefits when you can sell and move to a lower cost lifestyle). The way I figure it, even if appreciation is zero, if I can sell for close to what I spent to purchase it, I'm gonna have a lot more when I sell than if I had paid rent.

Another thing that's over-rated is buying a home that exceeds your needs or does not suit your lifestyle. ( if ya don't like yard work, then buy a townhouse or condo).

The ONLY reason I can think of for not owning is being unable or unwilling to stay in one place long enough to make it worthwhile.

[unclemick]

Prior to buying a duplex(1977) - the longest I stayed in one place(1966-1977) was two years.

Up/down economic cyles prevented making a 'killing' - the old location,location,location - the rentals, and staying ahead of inflation afforded a modest profit afer 15 yrs. And rental/cap gain helped the first ten years of ER.

I have no desire to become a landlord again - but real estate(all forms) can be a viable path for some.

[otako]

Home ownership is not in any way over-rated due to very favorable tax treatment of mortgage interest and ability to leverage. *What other appreciating asset can you buy had for 0-5% down? *

What's over-rated is appreciation of real estate (because it only benefits when you can sell and move to a lower cost lifestyle). *The way I figure it, even if appreciation is zero, if I can sell for close to what I spent to purchase it, I'm gonna have a lot more when I sell than if I had paid rent.

Another thing that's over-rated is buying a home that exceeds your needs or does not suit your lifestyle. ( if ya don't like yard work, then buy a townhouse or condo).

The ONLY reason I can think of for not owning is being unable or unwilling to stay in one place long enough to make it worthwhile.

What's moving every two years? I'm going to officer in the Air Force for foreseeable future. That means a move almost every two years to a new duty location. It could be a location in the states or overseas. Buy or Not buy?

Here is my advice.

Only being in an area for a short period of time is difficult to turn a profit in real estate.

If you get money to live off of the base team up with a few guys and rent a place and invest your extra $. You'll have a better time and can concentrate on Girls (assuming that you are straight and a Male).

Less hassle
and you won't have to dump any of your own $ into a place that you won't be staying in.

[Nords]

What's moving every two years? *I'm going to officer in the Air Force for foreseeable future. * That means a move almost every two years to a new duty location. *It could be a location in the states or overseas. *Buy or Not buy?

We moved every 2-3 years for 20. We bought in every duty station when we expected to be there for more than a couple years, but this was when RE was hot. In retrospect we had far more luck than planning (or common sense).

We know plenty of people that bought at every duty station. As absentee owners with the cost of property managers, they're usually in the red for 5-10 years before the cashflow turns. If you're saving 20-25% of your paycheck (and if you can trust the property manager not to rent the place out on their own while claiming it's vacant), then eventually you can make money.

We bought here in 1989, got flattened by the Japanese real estate collapse of the '90s, and had to be absentee landlords between '94-97. We had good tenants and realistic expectations but the property still took a lot of hard wear. If we'd had to sell then our losses would have been above $50K. It also took 11 years to have the appraised value equal our cost basis.

USAF is notorious for moving officers every 18-24 months to cover gapped billets. If you buy and have to sell in less than two years with almost no notice, it's almost impossible to win this lottery every time. If the RE market is having a down year, that'll quickly turn you into a long-term owner/absentee landlord. The challenge is being able to finance all those mortgages during prolonged vacancies & low rents!

[Hyperborea]

Home ownership is not in any way over-rated due to very favorable tax treatment of mortgage interest

The problem with that argument is that the tax advantage has probably been fully priced into the market. The only people who benefited were those who bought before the introduction of the tax break and sold afterwards.

Couple that with the fact that many people are better off taking the standard deduction than itemizing anyways. Those taking the standard deduction might even be worse off since the home prices are higher to account for the tax deductibility of mortgage interest for some but they are unable to take advantage of it.

[haha]

I think in many cases the decision between ownership or renting depends on what someone wants, local factors, life style, etc.

But there can be a bedrock security in owing a home, all other things constant. A woman I know has had terrible health. She is 59, and on SS Disability. She is qualified for Medicare, but not
Medicaid. She owns her house outright. Because of her disability, she gets some break on real estate tax.

She is able to live in a decent house in a decent neighborhood on the approx. $765 per month that she gets. Clearly she depends on her kids, neighbors, etc. for some help with maintenance emergencies. But if she were renting, she likely would have been evicted long ago.

Mikey